- Associated Press - Thursday, March 31, 2016

LINCOLN, Neb. (AP) - Nebraska lawmakers reached a compromise Thursday on a property tax package aimed at farm and ranch land owners, despite complaints that senators haven’t done enough for city dwellers.

A watered-down version of the bill won first-round approval, 39-2, after more than six hours of debate. The bill is one of two introduced on Gov. Pete Ricketts’ behalf.

Some lawmakers initially opposed the measure, arguing that it would create budget hardships for the state next year and do little for people who don’t work in agriculture.

Farm and ranch landowners would receive a larger tax credit to offset some of their local property taxes if the measure clears more two rounds of debate, while the amount available for commercial and residential property owners would stay the same.

The measure would increase the total amount in the state’s property tax credit fund to $224 million a year, from the current $204 million. The tax credits for residential and commercial property owners would remain unchanged, while the credits for farm and ranch land owners would rise by $20 million.



The shift wouldn’t take place until 2017, meaning it wouldn’t affect the current budget, but the delay raised concerns that lawmakers will have to figure out how to pay for it next year.

An earlier version that was scrapped would have allocated $30 million and imposed new budget restrictions on community colleges, which rely on property taxes. The bill’s sponsor, Sen. Mike Gloor of Grand Island, said he’s “optimistic” the bill will advance through the next two rounds of voting required before it goes to Ricketts.

In a statement, Ricketts praised the vote and said he will keep working with senators on reducing taxes.

“The Legislature’s decision to advance (the bill) is a good sign that we will be able to deliver much-needed property tax relief to hardworking Nebraskans this year,” he said.

Several senators expressed frustration that lawmakers have focused heavily on agricultural property taxes in the last few years instead of income taxes. Sen. Jim Smith of Papillion, a small business owner, floated an amendment that would have gradually lowered Nebraska’s tax rates between next year and 2022.

Smith eventually withdrew the amendment but implored lawmakers to look beyond tax benefits solely for agriculture, which he said is dividing urban and rural senators.

“Shame on those senators that stood up and defended splitting our state and not taking on a more uniform, comprehensive approach to tax relief,” Smith said.

Farm groups point to soaring property values that have increased their taxes, even though farm incomes are declining in tandem with commodity prices. John Hansen, president of the Nebraska Farmers Union, said his group has seen an increase in calls from producers who are struggling financially. Hansen argued that the state should increase direct funding for K-12 public schools, which are by far the largest consumer of property taxes in rural areas.

The bill “isn’t the long-term sustainable solution that we need,” Hansen said. “But it’s something.”

Sen. Heath Mello, the outgoing chairman of the budget-focused Appropriations Committee, said the new version helped ease some concerns about the budget.

“We feel comfortable with what we have in front of us,” he said. “It does not create a budget shortfall to the extent that we can’t handle it.”

Sen. Kate Bolz of Lincoln, an Appropriations Committee member, said she understands that Nebraska governments rely too heavily on property taxes. But Bolz pointed to the projected $196 million state budget shortfall that lawmakers will have to fill next year.

Bolz said she sees the state economy as mixed, with stagnant employment and a slowing farm economy, but strength in construction and financial services. Lawmakers have used different tactics in recent years to balance the budget, such as tapping federal stimulus money and taking back unspent money from state agencies, but Bolz said lawmakers are running out of options.

“We need to move forward with our eyes wide open,” she said.

Sen. Paul Schumacher said the budget outlook “should scare the living pants” off of lawmakers who will have to deal with future budgets.

“Those chickens are going to come home to roost,” he said to his colleagues. “You’re going to be left to clean up the mess.”

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The bill is LB958

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